NEW YORK - August 29, 2010 - Faced with mounting debt and looming costs from the new federal health-care law, many local governments are leaving the hospital business, shedding public facilities that can be the caregiver of last resort.

This spring, officials in Lauderdale County, Alabama opted to transfer their 91-year-old Eliza Coffee Memorial Hospital and other properties to a for-profit company after struggling to satisfy an angry bond insurer.

"We were next to knocking on bankruptcy's door,'' said Rhea Fulmer, a Lauderdale County commissioner who approved the deal with RegionalCare Hospital Partners of Brentwood, Tennessee, but with trepidation. She said the county had no guarantee the company would improve care in the decades to come. "Time will tell.''

In May, Clinton County, Ohio sold its hospital to the same company. Officials in Kenai Peninsula Borough, Alaska are weighing a joint venture with a for-profit company, similar to one the same company made with Bannock County, Idaho. Prince George's County, Maryland is seeking a buyer for its medical complex.

More than a fifth of the nation's 5,000 hospitals are owned by governments and many are drowning in debt caused by rising health care costs, a spike in uninsured patients, cuts in Medicare and Medicaid, and payments on construction bonds sold in fatter times. Because most public hospitals tend to be solo operations, they don't enjoy the economies of scale, or more generous insurance contracts, which bolster revenue at many larger nonprofit and for-profit systems.